Key Points
- Brent crude rises 58 cents, or 0.8%, to $72.57 a barrel
- WTI crude gains 88 cents, or 1.3%, to $70.11 a barrel
- Prices remain well below last week’s levels despite Monday’s rebound
- US-Iran agreement to halt strikes and resume talks eases supply concerns
- Strait of Hormuz shipping risks continue to support oil prices
ISLAMABAD: Global oil prices edged higher on Monday after the post-deal Iran-US exchange of strikes; however, a quick return to diplomacy capped early gains as traders remain cautious of volatility.
Juxtaposition of renewed tensions in the Middle East and the return of diplomacy between the United States and Iran left traders on the sidelines.
Fresh tensions in the Middle East have helped crude markets stage a modest rebound after suffering their steepest weekly losses since the conflict began. Announcements from both sides to resume talks after halting strikes eased market sentiment and capped gains, but prices still refused to go down.
However, analysts anticipate a further decline in crude oil prices once talks proceed and Iranian oil returns to the market.
Oil market levels
Brent crude futures rose 58 cents, or 0.8 per cent, to $72.57 a barrel during early Asian trading. The US West Texas Intermediate (WTI) crude gained 88 cents, or 1.3 per cent, to $70.11 a barrel.
The recovery followed Friday’s sharp sell-off that saw Brent close at $71.99 and WTI settle at $69.23.
Monday’s gains were driven by lingering geopolitical risks after fresh military incidents over the weekend, though optimism surrounding renewed diplomatic engagement kept prices from rising further, according to Reuters.
The rebound recovered only a small portion of last week’s heavy losses.
Brent fell 4.34 per cent on Friday alone, taking its weekly decline to nearly 10.9 per cent, while WTI lost 3.74 per cent on the day and about 9.6 per cent over the week.
The sell-off reflected growing confidence that Gulf oil exports would avoid prolonged disruption following the announcement that Washington and Tehran had agreed to halt direct strikes and resume negotiations.
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The market reaction has remained measured compared with the sharp rallies witnessed earlier in the conflict. Brent had retreated to around $72 per barrel and WTI to about $69 after hopes of a sustained truce and improving tanker movements through the Strait of Hormuz erased much of the geopolitical premium that had been built into crude prices.
Analysts said oil prices are now being pulled in opposite directions. Fresh attacks and ongoing security concerns surrounding commercial shipping in the Strait of Hormuz are supporting prices.
At the same time, the resumption of US-Iran diplomacy has significantly reduced fears of a wider regional conflict and a major disruption to global oil supplies.
Improved oil shipping activity
Shipping activity through the Strait of Hormuz has improved from the lows recorded during the height of the conflict; still, vessel operators continue to face elevated insurance costs, longer transit times and operational uncertainty.
Energy analysts believe a full return to normal trading conditions could still take several months as infrastructure repairs and shipping schedules gradually recover.
Saudi Aramco has also resumed crude loadings from its Ras Tanura export terminal, following temporary disruptions, which provides additional reassurance that Middle Eastern producers are restoring export capacity.
However, traders remain cautious that any collapse in negotiations or renewed disruption to shipping could quickly push prices sharply higher once again.
Financial markets increasingly view the diplomatic process, rather than military developments alone, as the key driver of oil prices.
Investors are closely monitoring the next round of US-Iran talks, the pace of recovery in Gulf crude exports and tanker traffic through the Strait of Hormuz to gauge whether the current stability can be sustained.
Unless negotiations break down or exports from the Gulf are significantly disrupted again, analysts expect crude prices to remain broadly anchored in the low-$70-per-barrel range.
The market is expected to maintain only a modest geopolitical risk premium rather than pricing in the severe supply shock feared earlier this month.
